Penalties and Interest - Three Figures That Stand Above the Contract
The typical picture with online and micro loans looks like this: 800 lari borrowed, 4,500 demanded, and the company's explanation - "that is what the contract says". The contract does indeed say so, but the law sets three figures that stand above it: the annual effective rate may not exceed 50%, penalties may not exceed 0.27% of the obligation per day and, in total, 1.5 times the outstanding principal. Anything above those caps is void, and after a recalculation it often turns out that the lawful sum was paid off long ago.
This page explains how those caps work in practice: how the effective rate is calculated and what goes into it, how a debt is recalculated from scratch, what happens to sums already overpaid, how a lawyer answers a collector's demand and a creditor's court claim, what the limitation period is and what happens when a debt collector breaks the rules. Restructuring and mortgage enforcement have their own pages.
Three Caps and What Each Does in a Recalculation
The caps operate at the same time and complement each other - so a recalculation tests all three in parallel, not one after the other.
Recalculating the Debt and Disputing It - the Stages
Requesting the documents
The contract with every annex and tariff, the full payment history and a detailed breakdown of charges (principal, interest, penalties, fees with dates). The creditor must provide this information to the consumer; a refusal or silence is itself a ground for a complaint to the National Bank.
Recalculating the effective rate
The lawyer works out what the real annual effective rate was, including all fees - the "interest" stated in the contract and the real effective rate are often two different figures. Anything above the cap is void and drops out of the calculation.
Recalculating penalties under both caps
0.27% per day for each period in arrears and 1.5 times the outstanding principal in total. The lawyer builds a table by date: what was charged, what was permitted, what the difference is. That table is the central document of the whole dispute.
Re-appropriating the payments
Once the unlawful charges are removed, every payment is re-appropriated - and it often turns out the principal is already repaid and the later payments are overpayments. Those are refunded or set off against another obligation.
Demand to the creditor and complaint
A written demand with the recalculation: reduce the sum, remove the unlawful charges, refund the overpayment. Where there is no reply or a refusal - a complaint to the National Bank (consumer rights protection), whose conclusion is weighty evidence in court.
Court - defence or claim
If the creditor has sued, the lawyer raises the recalculation and limitation in the defence; where there is an overpayment, files a claim for unjust enrichment. In parallel, suspension of enforcement if the case is with the Bureau, and recording any unlawful collection practice.
Online and Micro Loans - Where 4,500 Lari Comes From on an 800-Lari Loan
The online loan model is built on a small sum and a short term: 500 to 1,500 lari for 30 days at a formally "small" daily percentage. Converted into an annual effective rate, that figure often ran into hundreds of per cent - which is exactly why the 50% cap was introduced. The second layer is fees: origination, "servicing", extension, reminders, insurance - each looks small, but all of them go into the effective rate and together break the cap.
The third layer is default: a daily fine, a daily penalty, an "administrative" charge and often a higher interest rate. Here two caps operate at once - 0.27% per day on the total and 1.5 times the outstanding principal. It is the second cap that destroys the typical "debt": the penalty on an 800-lari loan cannot exceed 1,200 lari, however long the arrears last. The maximum lawful claim is 800 plus lawful interest plus at most 1,200 - not 4,500.
The fourth layer is collectors: a company buys the debt at a discount (often 10-20% of face value) and demands the full sum, frequently after limitation has expired. The lawyer's answer here is two steps: the recalculation (how much is lawful) and limitation (whether it is claimable at all). That is exactly why collectors offer "a 50% write-off in exchange for signing a new schedule" - the signature revives a time-barred debt and confirms the sum in your own hand.
What a Recalculation Dispute Rests On
- 50%
- The upper limit on the annual effective interest rate, which includes interest and all fees together; anything above it is void. The limit is set by law and changes periodically - in a dispute it is checked against the version in force.
- 0.27% per day
- The combined daily cap on fines and contractual penalties on an obligation in arrears; charging a separate "fine" and a separate "penalty" does not get around the cap.
- 1.5 times
- The overall ceiling on accrued penalties relative to the outstanding principal; once that ceiling is reached, further charges are void however many years pass.
- Right to information
- A consumer is entitled to a copy of the contract, the tariffs and a detailed breakdown of charges; a creditor's refusal or silence is challengeable before the National Bank.
- Collection conduct rules
- Regulation limits the timing and frequency of calls, prohibits disclosing the debt to third parties, threats and misleading statements; a breach is complained of to the National Bank and strengthens the debtor's position in the dispute.
- Limitation and acknowledgement
- Once the period expires a court will not uphold the claim if the defendant raises it; but a written acknowledgement or a partial payment restarts it - which is checked separately before anything is signed.
What the Lawyer Needs to Recalculate the Debt From Scratch
- The loan contract with all annexes, tariffs and extension terms (including the text of an electronic contract and the record of confirmation).
- The full payment history: date, amount, method - from the bank statement or the creditor's system.
- A breakdown of charges from the creditor: how much principal, interest, penalty and fees, by date.
- Every notice and demand from the creditor or collector - with dates (to check limitation and the collection rules).
- The history of the loan and its extensions: if the loan was "renewed" several times, the terms of each renewal.
- Records of calls and messages where the collector breaches the rules - time, frequency, contact with third parties.
Three Recalculation Cases
800 lari that became 4,500
An online loan company demanded 4,500 lari three years on from an 800-lari loan. The lawyer requested the breakdown of charges and recalculated: the effective rate exceeded the cap and the penalty exceeded both caps. The lawful total came to 800 plus interest plus a maximum of 1,200 in penalties; after re-appropriating the payments the principal turned out to be repaid already. The company reduced its demand and the remainder was closed by settlement.
A collector's claim five years on
A collection company sued on a debt whose last payment had been five years earlier. The lawyer: limitation in the defence and, in the alternative, a full recalculation under the caps; the defendant had signed nothing during that period. The court dismissed the claim as time-barred.
A collector who called the neighbours
A debt collector called the debtor at night and told the neighbours and the employer about the debt. The lawyer: call records and witness statements, a complaint to the National Bank about breach of the collection conduct rules and, in parallel, a recalculation of the debt. The company was issued with an instruction, the calls stopped, and after the recalculation the debt fell by almost two thirds.
Questions About Penalties and Interest
I signed the contract myself. Do the caps still apply?
Yes - these are mandatory rules and cannot be contracted out of. Your signature does not make an amount above the cap valid: the excess is void, whatever the contract says and however many times you confirmed it electronically. That is exactly why a recalculation is the first step in the dispute.
I have already paid part of the debt. Will the overpayment be refunded?
If the recalculation shows the lawful debt is already repaid, the overpayment is unjust enrichment and is refunded - or set off against another obligation if one exists. That is a separate demand to the creditor and, on refusal, a claim. In practice the company often agrees to write off the debt in full instead of refunding.
The collector is offering "a 50% write-off". Is it worth taking?
Two things must be checked first: whether the debt is time-barred (in which case a signature revives it) and how much is lawful after the caps. Often the "written-off" part is precisely the unlawful penalty that could not be recovered from you anyway. You should sign only once the figure has been recalculated and the text states that no claim remains after payment.
The creditor has sued me. Will I lose?
Not necessarily - on the contrary, court is often better for a debtor than "negotiating" with a collector: the judge checks the caps, takes limitation into account and frequently reduces the sum substantially. What matters is filing the defence in time, with the recalculation and a plea of limitation - without a defence the court will award the sum exactly as claimed.
Do the same caps apply to a bank loan?
Yes, the effective rate cap and the penalty caps apply to bank loans too - the difference is only that a bank's rate is usually below the cap anyway, while the accrual of penalties over long arrears runs into the limit. On a mortgage loan this recalculation matters especially, because the sum stated in the writ of execution determines the auction of the flat directly.
Lawyers for Penalty and Interest Disputes
The key instrument in this dispute is a table - the charges recalculated by date against the caps, which the creditor cannot argue with. Within 15 minutes the coordinator connects you with a lawyer who recalculates online and micro loans and litigates against collectors on a regular basis.
No published lawyers in this category yet
That does not mean we cannot help. Call us - we will match you with a specialist for a remote consultation or from a nearby city.
Call: 568 330 318Is the Sum Demanded Several Times What You Borrowed?
At a free consultation the lawyer recalculates the charges against the caps and tells you how much of the debt is actually lawful, whether it is already repaid and whether the claim is time-barred. The coordinator calls in 15 minutes - before you sign any new schedule.